Fed could end asset purchases in October

11 Jul 14
The Federal Reserve is set to end its stimulus package in October if the US economy continues to progress, the central bank’s June meeting minutes have revealed.

Following a two-day meeting in Washington DC, the Fed’s Open Market Committee, which sets monetary policy, said: ‘While the current asset purchase program is not on a preset course, participants generally agreed that if the economy evolved as they anticipated, the programme would likely be completed later this year.’

The purchases have been in place since December 2008 in a bid to boost economic activity and keep interest rates low.

The Open Market Committee has been tapering the quantitative easing program in gradual steps of $10bn this year, bringing monthly purchases down from a high of $85bn in December to $35bn in June.

After its July and September meetings, the FOMC indicated that it would continue with their $10bn cuts until a final $15bn reduction in October.

‘If incoming information continued to support its expectation of improvement in labour market conditions and a return of inflation toward its longer-run objective, it would be appropriate to complete asset purchase with a $15bn reduction in the pace of purchases in order to avoid having small, remaining level or purchases receive undue focus among investors.

‘If the economy progresses about as the committee expects, warranting reductions in the pace of purchases at each upcoming meeting, this final reduction would occur following the October meeting.’


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